The basics of personal selling for entrepreneurs

Personal selling means selling a product or service directly to customers, highlighting product or service features and persuading the customer to buy.

Benefits of personal selling

This face-to-face type of selling is very common in the initial stages of business to get your product or service seen and known — especially for retail businesses. Although it can be very costly (because it’s so labour-intensive) it’s also very credible, clear and focused on your target market.

Tips for face-to-face sales

To be effective, the customer has to be interested first. You can help this along by letting people know that you have a product or service that can meet their needs and offer a solution.

Next, determine what needs to happen for this customer to buy what you’re selling. It’s important to ask the customer what they’d like included with the product or service, or particular elements or characteristics that they’d like to see. Be sure to meet your customer’s conditions and requirements when producing and selling your product.

Aside from meeting conditions, you must also address your customer’s hesitations. Assess your offerings honestly and consider some of the “turn-offs” or downsides to your product or service, and be sure to come up with ways of improving or defending any potential concerns or objections that your customer may have. Be sure to answer questions persuasively and comfort concerns.

To close the sale, avoid letting the customer leave with an excuse or a conditional promise. Ask them directly how they’d like to pay for the product or service, or book an appointment for delivery.

Finally, to satisfy the customer and encourage loyalty, perform post-sales activities and follow-up to ensure customer satisfaction.

Personal selling is a particularly important method for business-to-business customers. Salespeople are the face of your small business, so make sure they’re well-trained, know your products or services, and know how to develop a solution to your customer’s problems.

Share this post:
small business sales

Hate selling? Try this mindset shift

No matter your business, selling is at the heart of it. After all, it’s hard to succeed if you’re not selling your product or service to new and existing customers.

That’s all well and good, but the mindset needed for selling doesn’t come naturally to all entrepreneurs. Some small business owners wonder how to you actually close a sale, or what the best way to ask for business is. Sometimes, this uncertainty can lead to poor sales and marketing strategies like sending blanket, generic marketing messages, or being too pushy with our self-promoting because we think we have to be.

Have no fear! Selling doesn’t have to be scary, and you can get more comfortable with it. Then, you can make more strategic sales and marketing decisions that make sense for your business – and you might even have fun doing it.

Check out GoForth Expert Marty Park’s advice on how to change your mindset about selling. We think it’ll help you to think about sales a little differently!

Share this post:
small business market testing

How to estimate your small business’ sales

Estimating sales is an important step to determining the overall achievability of your business idea. The better your sales forecast, the better able you’ll be to make that critical “Go, no go or grow?” business decision. Estimating sales allows you to organize market and financial data in a way that helps you determine what your profit might be.

Profit, as you probably already know, is the money that’s left over after all your expenses have been paid. It’s from business profits that most small business owners pay themselves, particularly in the first few years of operation. No profit, no paycheque for you. That’s no way to live.

At GoForth Institute, we believe that you should be able to live comfortably as a small business owner right out of the gate. However, that takes planning. And lots of it! So let’s look at one of the most important tasks of pre-venture planning — the sales forecast.

There are three methods for creating a sales forecast: i) Market share method; ii) Daily capacity method and iii) Market testing.

Market share method to estimate sales

In the market share method, the sales forecast begins with an estimate of market size. This is the total number of consumers or businesses in your trading area that would be interested in purchasing your product or service. It’s your target market, but with a number attached to it — how many are there?

Once you have your market size, you need to estimate their consumption — how much are they currently buying? You can get information on past consumption through primary market research or secondary market research.

When you have an estimate of the number of buyers in your area and how much they buy each year, you can estimate total market demand by multiplying the two numbers together. For example, Jill and her sister Lauren want to open a flower shop. Their city has 100,000 households, but not everyone in the city would travel to their shop. So they assumed that only people who lived within five kilometres of their flower shop would want to do business with them.

Here’s market demand for Jill and Lauren’s flower shop:

City Size = 100,000 households
Market Size = 10,000 households live within five kilometres of their store
Annual Spending per household on floral arrangements = $140 (from local statistics)
Total Market Demand = 10,000 households × $140 spent per year = $1,400,000

Market demand vs market share

Market demand is not the same as market share. If Jill and Lauren open their shop, it will make theirs the seventh flower shop competing for the total market demand for flower arrangements. So, assuming all competitors are equal in size and competitive advantage, and that Jill and Lauren could jump right into business without any retaliation from competitors, they could potentially earn a one seventh share of the total market demand for flowers. So how does that translate into estimated sales for them?

Total Market Demand = 10,000 households × $140 spent per year = $1,400,000
Estimated Market Share = 14%
Estimated Sales for one shop = $1,400,000 × .14 = $196,000 in sales.

So, using the market share method of sales forecasting, Jill and Lauren (and hopefully you!) see the potential revenue for their shop. This estimate should be adjusted to account for seasonality, special events (like Valentine’s Day flower purchases), and general economic conditions of the region, weather, seasonal changes and holidays. It’s impossible to predict the factors that will most likely impact sales, but you should try to account for them in your sales forecasts.

Daily capacity method to estimate sales

With method of developing a sales forecast, you estimate what you think you could sell on a daily basis. Let’s go back to Jill and Lauren, the flower shop owners we talked about last week. They could estimate the number of customers coming into their shop to make a purchase of flowers or accessories, and the number of flower arrangements sold over the phone for delivery on a daily basis.

Here’s what their sales worksheet looks like:

Product/service Price Units sold/day Total Sales
Floral arrangements by phone $75 5 $375
Floral arrangements in person $60 5 $300
Accessories, home décor $35 10 $350
Cards $4 5 $20
Total estimated daily sales $1,045.00

Assuming the business will be open six days of the week, every week of the year (or 312 days), Jill and Lauren can estimate their annual sales by multiplying 312 days × $1,045.00 to get $326,040. This estimate should also be adjusted for seasonal sales, economic conditions of the region, and so on.

Market testing to estimate sales

Market testing is another way to estimate sales in your small business. Here are the steps involved:

  1. Develop a prototype, model or description of the product or service that you can show to others. Most ideas for new products or services don’t work the first time. With a model or prototype, you can photograph it or create a picture of some kind and demonstrate it to a prospective buyer. It also allows you to try it out for yourself to make sure it works. (Be sure to keep accurate notes of your research; you may come up with an even better idea later.)
  2. Seek out potential customers with your sample or prototype and ask if they would buy it, how often and how much of the product or service they’d buy. Be sure to call on the individual who makes buying decisions. Then ask them how much they’d pay for this product. If people criticize your new product idea, ask them why. Ask how the product could be modified to make it more attractive.

The only real test of a product or service idea is a live market test. Listen carefully to comments and objections of the buyer – their feedback is priceless. Most importantly, listen for their interest to purchase and comments on what they’d pay. From there you have the beginning of your sales forecast.

Good luck!

Share this post:
All about the competitive advantage

How to calculate your gross profit margin

Your gross profit margin is an assessment of your company’s financial health found by calculating the proportion of profit you have left compared to your daily sales. This measure of profit lets you compare your proposed business to operating businesses in your industry.

How to calculate your gross profit margin

To calculate your gross profit margin, you’ll need to know two other figures first.

One of the figures you’ll need is your cost of goods sold.

Cost of good sold, or COGS, is the price you paid to acquire the products that you’ll sell to your customers in retail/wholesale businesses, or the cost of the raw materials, labour and supplies in manufacturing businesses.

Most small businesses use the following formula to calculate their COGS expense:

Value of goods inventory at the beginning of the period
+
Value of any goods purchased for resale during the period

Value of goods inventory at the end of the period
=
The cost of goods sold during the period

Then, you’ll need to know your total estimated daily sales. Two methods of forecasting sales are the daily capacity method and the market share method.

Now that you have those figures, here’s how to calculate your business’ gross profit margin.

First:

Total estimated daily sales

Cost of goods sold
=
Gross profit

Then:

Gross profit
÷
Total estimated daily sales
x
100
=
Gross profit margin

Share this post: